The Insurance Innovators' Dilemma
Insurance Experts' Forum, May 9, 2011
Clayton Christensen, Harvard professor and author of The Innovator's Dilemma, says most large, well-established companies do a pretty decent job of managing themselves, and usually do the right things that are expected of them to respond to their markets. But the problem is that while they are concentrating on effectively managing their operations, disruptors swoop into the low ends of their markets with entirely new business models, catching the established leaders off guard.
Could the insurance industry be turned upside down by disruptors? This question came to mind as I read James Pasmantier's recent post of some of the innovations he is seeing taking place within the industry, and what still needs to be done in this post-recession, rocky recovery era.
Pasmantier points to a recent Deloitte paper that insurance companies will have a hard time achieving meaningful growth during a relatively sluggish economic recovery, especially as disruptive forces such as the Web continues to provide greater power to consumers to pick and choose options. The typical response from many insurance companies is to put all their energy into making existing processes more efficient and cost-effective, versus attempting to expand outward with new business approaches.
Carriers need to start thinking outside the box and explore new ways to innovate and transform their industry before someone else does it for them. Pasamantier says insurance companies need more of an innovation culture, and the most effective way to do this is to foster greater collaboration between employees and partners. He cites work his own company, BrightIdea, did with Nationwide, including a better way to bring new ideas to executives' attention. “Their existing electronic suggestion box was insufficient, with no mechanism for sorting, managing or implementing the thousands of ideas received,” he says.
The cloud-based idea management system, dubbed "The Great Ideas System," helped “provide employees a low-barrier way to submit, vote and collaborate on ideas while giving administrators the tools they needed to manage ideas, update users and get insight into the company's innovation program,” Pasmantier relates. This included new ideas that potentially could drive billions in new revenue.
Solutions such BrightIdea's, or other collaborative environments spawned by social media, such as wikis and blogs, are not a nice-to-have—they're a must-have in today's hyper-competitive, global marketplace. In recent times, information technology did an impressive job in keeping their operations above water and running cost-effectively. The economy may be in recovery mode, but those companies that obsess about efficiency and cost cutting increasingly will find themselves marginalized against players that embrace new, disruptive approaches to the marketplace.
This is a key role for information technology going forward—to not just serve as a cost-cutting vehicle, but to serve as a business intelligence and collaboration system that can keep pace with customer needs.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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